By Venessa Wong
Economists worry a recession will start in the next few months. There’s still time to beef up your emergency fund by thousands of dollars with these aggressive – but temporary – changes.
Many personal-finance experts were already warning that a cash emergency-savings account covering three months of necessary expenses in case of unemployment was likely too little for today’s job market – recommending a six-month buffer instead.
Now, as President Donald Trump’s tariff plans increase economists’ expectations of a recession and sent the Nasdaq COMP and Russell 2000 RUT stock indexes dipping into bear-market territory last week, some financial planners are suggesting bumping up those savings to cover a whopping 12 months of necessary expenses, and say it needs to happen quickly – especially if you are in an industry or occupation that has few job openings or are the sole earner in your household.
Moody’s Analytics Chief Economist Mark Zandi put the chance of a recession at 60% even after Trump announced a 90-day pause on “reciprocal” tariffs for dozens of countries. The markets rebounded briefly this week, but if the president doesn’t change course on tariffs in the next four to six weeks, “we’re done,” Zandi told MarketWatch. “I suspect by June, we will see job loss.”
Goldman Sachs, meanwhile, sees a 45% probability of a recession.
Even after the pandemic-induced downturn in 2020, “markets bounced back, and things were a little bit more clear in terms of what was going to happen within a couple of months,” said Michael Scarpati, chief executive of financial-planning platform RetireUS. “This is just, every day, ‘What’s going to happen?'”
He noted that it is taking, on average, nearly six months for unemployed people to find jobs. Having cash is especially preferable during periods of market volatility like we are experiencing now, he said, and tariffs will likely lead to cost-of-living spikes that will be easier for households to manage with bigger savings. “Twelve months [of savings] is very wise, if you can do it,” Scarpati told MarketWatch.
Cat Irby Arnold, the Washington state market leader at U.S. Bank, also recently told MarketWatch that a one-year emergency fund is “ideal.”
And personal-finance host and author Ramit Sethi recommended building a 12-month emergency fund in a social-media video last week, an “extreme” recommendation that he also made during COVID-19.
“Start cutting discretionary spending now, before the world forces you to. That’s how you protect yourself and position yourself to be ahead when things stabilize,” Sethi wrote in his newsletter.
Yet this advice is aspirational for the average American. In a May 2024 survey by Bankrate, just 28% of people had at least six months’ worth of expenses saved; 16% had between three and five months’ worth of expenses saved; 29% had less than three months’ worth saved; and 27% had no emergency savings at all.
Saving enough to live on for an entire year is never easy, especially for low- and middle-income households. People who are worried about losing their jobs soon may worry they do not have enough time to get their savings in order. But “people can change their lifestyle because their priorities have changed” and understand that it is only temporary, Spenser Liszt, a financial planner with Motif Planning, told MarketWatch.
If you’re in the “better safe than sorry” camp and are ready to make some serious – but temporary – budget cuts, here are some tips from personal-finance experts on how to add thousands of dollars to your emergency fund in the near term, as well as estimates of how much you could hope to save. When possible, the figures provided are the averages for households with kids.
Save your tax refund: $3,170 per household
The average tax refund so far this year is $3,170, data from the Internal Revenue Service shows. This year, the most common way people plan to use their refund is for savings: 49% of people surveyed by the National Retail Federation said they planned to save it, compared with 28% last year.
Get a side hustle: $400 per month
The fastest way to boost your emergency savings is to find other sources of income, said Liszt, and it’s become a very common tactic. In a recent LendingTree survey, 40% of respondents had side hustles, and the median earnings from these jobs were $400 per month. Common side hustles included food or grocery delivery, online freelancing and part-time or seasonal work. About 18% of survey participants said having an extra job was a short-term fix for financial security.
Stop eating out: $500 per month
Dining out and ordering meals in are “usually the biggest expenses that can be curbed by simply making a small lifestyle change,” said Jonathan Barrett, a financial planner with Barrett Financial Solutions. The average couple with kids spends about $500 per month eating out, while single people spend about $200 eating out, according to the Bureau of Labor Statistics.
Don’t shop: $350 per month
Couples with children spend $3,000 per year on apparel, according to BLS data. Kids grow and need new clothes, but for just a few months, lean on your local “buy-nothing” groups and hand-me-downs from family and friends until your emergency fund is where you want it to be.
These households also spend about $1,200 per year on personal-care products like shampoo, cosmetics and shaving products. This often includes impulse purchases that can be sourced instead from buy-nothing groups or put off until their savings are in order. One consumer previously told MarketWatch that in order to incentivize herself not to shop, she records the costs of all the things she considered buying but didn’t, and sets aside that money instead.
Put your hobbies on pause: $450 per month
Couples with kids spend about $5,400 per year, or an average of $450 per month, on entertainment – a category that includes sports, lessons, movies, club fees, equipment and gear, toys and pets, BLS data show. Hit pause on those activities for a few months and save that money. It won’t be forever.
Cut your grocery bill: $200 per month
After you’ve eliminated your dining-out budget, it’s no fun to also reduce your grocery spending – but again, if you decide your priority is to save as much as possible in a short period of time, groceries are another place in the budget to find some wiggle room. The average U.S. household spends about $6,000 each year on groceries, but the lowest-income households spend just $3,700. The difference averages out to about $200 per month.
From the archives (April 2024): You’re paying a lot more for food these days. Here’s how to save money on groceries.
Reduce your 401(k) contribution rate: $350 per month
This wouldn’t be the first place to cut back – retirement savings are really important – but if you think you might lose your job, you can temporarily divert a portion of your retirement contributions to your emergency fund. If you’re funding your 401(k) at a level higher than your employer’s matching contributions, “you can cut it back to the match,” Brian Preston, author and co-host of the Money Guy Show, told MarketWatch.
The most common match formula on Fidelity plans is based on a 5% contribution rate (matching 100% on the first 3% and then 50 cents on the dollar on the next 2%). Employees in Fidelity’s data contributed an annual average of $8,800 at an average rate of 9.4% last year. By temporarily reducing their contribution rate to 5%, they could still get their employer match while redirecting roughly $350 each month toward emergency savings.
Sell your stuff
This may not be an option for the minimalists out there, but if you’ve got a lot of stuff sitting unused in your home, think about how much all of it is worth. Selling a few big items – bikes, electronics, furniture, tools, maybe even a car you never use – could get you to your savings goal a lot faster. You could set a goal for how much you want to raise from reselling – for example, $300 per month.
“Everyone’s different, but you might have collectibles, or a bunch of gear, or something from your past life” collecting dust in your garage, Liszt said. “You could have a big haul right in your own home.”
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-Venessa Wong
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04-14-25 0950ET
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